Transaction Taxes – Impose a Transaction Tax on Trades Made at the Mercantile Exchange and Board of Trade

Revenue: $37 million

Chicago is home to three major financial exchanges:

The Chicago Mercantile Exchange (CME), which is “a global futures and options exchange.”[1]

The Chicago Board of Trade (CBOT), which is “the world’s oldest futures and options exchange.”[2]

The Chicago Board of Options Exchange (CBOE), which is “the largest U.S. options exchange.”[3]

In 2007, CME merged with CBOT to become CME Group and in 2008 acquired the parent company of the New York Mercantile Exchange.[4] CME Group is now the largest derivatives exchange in the world.[5]
Under this option, the City would impose a $.01 tax on each contract traded on these exchanges. The table below details the 2010 volume of contracts for the three exchanges and how much revenue a $.01 tax would generate from each.

Thus, a $.01 tax on all contracts traded at these exchanges would generate approximately $37 million annually, assuming the trading volume was otherwise consistent.

Proponents might argue that CME Group and CBOE are both profitable companies that can afford to pay a small tax to help fund City services, many of which they benefit from. Also, others might argue that taxing financial transactions would reduce financial speculation that contributes to economic uncertainty.[6]

Opponents might argue that the imposition of transaction tax would almost certainly cause the exchanges to leave the City. The exchanges could easily move as most of the transactions are done via computers. New York City imposed a similar tax on the New York Stock Exchange only to repeal it in 1977 in order to prevent the exchange from leaving the City.[7]